LYC - Lynas Rare Earths

[nioka]

Sorry but I'm not completely convinced it's as bad as you say. Sure (just the) cash component at $20Mill seems small, but if so, why aren't competing bids coming in?

This is a non-core asset, containing non-core materials, in tantalum, niobium and phosphates, which Lynas isn't targeting, and even if it was, they say would cost $1Billion to develop. How Forge, on the back of a $30Mill capital raising, are going to manage it -who knows.

But, in the absence of a better offer for the Crown polymetallic deposit and Swan phosphate deposit, there is no opportunity cost to Lynas here.

Read the independent experts report by Grant Samuel before jumping to conclusions. There are safeguards, such as the rights to independently prospect; retained rights to the REEs; downstream royalties; rare earth feedstock supply for the Malaysian LAMP; also the right to cancel if Forge don't proceed within 5 years.

Would this deal have happened without the links to Forge of LYC Directors Nicholas Curtis and Jacob Klein? Probably not. Will Mr Curtis benefit personally? Yes in a big way. Does this make it a bad deal for Lynas? Can't see it in the near to medium term, the whole thing has been negotiated at arms length.

It's all a bit tawdry, yes, and a flea speck in Lynas' overall budget, but that's not necessarily a reason to oppose it.

Firstly there are no other bids talked about because the company has never pit the lease on the market. However there is at least one other bid that I know about that would be much better than the one being decided now. The company don't want to recognise it.

Secondly it is NOT a non core asset it has high levels of heavy rare earths that Lynas needs and will be buying back from Forge at "market prices".

The rare earths value on estimates at the quantities previously stated as available and at todays prices are valued at $78 billion dollars according to figures I have seen today. The tantalum is valued at $4.525 billion and the Niobium at $50.423 billion Then there is titanium, zirconium and phosphate. This is for the Crown deposit alone and then there is the Swan deposit for which I have no figures.

All that for a measley $20 million. No wonder Curtis will get bonus shares to the value of over $20 million for "bringing a commercial resource" to Forge.

That IS something to be worried about. This is our CEO feathering his own nest at the expense of Lynas shareholders. Vote NO it is important for anyone who has any financial interest in Lynas.

 

[TheAbyss]

Firstly there are no other bids talked about because the company has never pit the lease on the market. However there is at least one other bid that I know about that would be much better than the one being decided now. The company don't want to recognise it.

Secondly it is NOT a non core asset it has high levels of heavy rare earths that Lynas needs and will be buying back from Forge at "market prices".

The rare earths value on estimates at the quantities previously stated as available and at todays prices are valued at $78 billion dollars according to figures I have seen today. The tantalum is valued at $4.525 billion and the Niobium at $50.423 billion Then there is titanium, zirconium and phosphate. This is for the Crown deposit alone and then there is the Swan deposit for which I have no figures.

All that for a measley $20 million. No wonder Curtis will get bonus shares to the value of over $20 million for "bringing a commercial resource" to Forge.

That IS something to be worried about. This is our CEO feathering his own nest at the expense of Lynas shareholders. Vote NO it is important for anyone who has any financial interest in Lynas.

Appreciate your passion Nioka and am a holder looking at 2 packs received yesterday re a vote.

My question is why did we think it fair to pay $4m for the Kangankunde deposit which will have significant devlopment costs i would imagine? We are getting 5 times this amount for Crown/ Swan yet the resource is not 5 times as much as i understand it though the complexities around 17 items to a basket all with different values skews it for me.

Also i am intrigued how we can be talking about figures of $4m and $20m yet in the same paragraph a potential resource value in the billions of dollars. Must be a lot of risk/ cost in converting an in situ resource into a deliverable product?

Just questions and probably vote no on the strength of the where theres smoke there is fire principal.


Key points below re Kangankunde.

Key Points:
• The main conditions precedent of the Purchase Agreement for the acquisition of the fully permitted Kangankunde Rare Earths Resource in Malawi, Africa, have been met. Lynas expects to complete the acquisition of this asset within the next few weeks for the contract sum of US$4 million
• The deposit has an Inferred Resource of 107,000 tonnes of Rare Earths Oxide (REO) at an average grade of 4.24% REO using a 3.5% REO cut-off grade. At a 3% REO cut-off grade the resource increases to 180,000 tonnes REO and remains open at depth
• The deposit also contains strontianite and phosphate minerals which Lynas will actively examine to determine whether they can be economical by-products
• Importantly, the deposit has extremely low natural radiation levels for a Rare Earths deposit, with an average of 11ppm thorium oxide per percentage of REO content
• Completed test work shows the deposit is amenable to a low cost gravity separation concentration process producing a 60% REO concentrate

 

[Logique]

Kangankunde provides a hint as to why Lynas themselves say that the Crown deposit is non-core business, they are looking at their business as a whole.

I'd take holders to page 7 of the Notice of Extraordinary Meeting on 18th May, 3.4 Deposits in the Sublease Area, which says (my highlights):

"..The Sublease Deposits do not form part of Lynas' Rare Earth resource inventory. As the objective of Lynas is to create a reliable, fully integrated source of Rare Earth from mine to market, Lynas regards the Sublease Deposits as non-core assets because they do not fit within Lynas' strategic vision or strategy. It is therefore unlikely that the funds and other resources that would be required for Lynas to develop the Sublease Deposits will be allocated for that purpose and accordingly, the Independent Board Committee believes that, in the absence of the transaction, it is unlikely that any shareholder value will be realized directly from the Sublease Depoits in the medium term.."

Don't get me wrong, if another bidder materializes before 18th May, or if a better offer comes from Forge, I'd be pretty happy with that.

 

[TheAbyss]

Interesting article on this subject here: http://www.theaustralian.com.au/bus...lict-of-interest/story-e6frg8zx-1226038738532

A no for now is a must on this basis imo

 

[nioka]

"..The Sublease Deposits do not form part of Lynas' Rare Earth resource inventory. As the objective of Lynas is to create a reliable, fully integrated source of Rare Earth from mine to market, Lynas regards the Sublease Deposits as non-core assets because they do not fit within Lynas' strategic vision or strategy. It is therefore unlikely that the funds and other resources that would be required for Lynas to develop the Sublease Deposits will be allocated for that purpose and accordingly, the Independent Board Committee believes that, in the absence of the transaction, it is unlikely that any shareholder value will be realized directly from the Sublease Depoits in the medium term.."
.

Just remember that the "independent" adviser was a renamed Sino Resources, renamed only one week before the report. Google Sino resources and see what you come up with. If you research all the information about this it will surprise you the associations that are involved in this deal. There is more here than meets the eye at first glance. There is a story here that could well end up a movie that will rival Underbelly.

 

[nioka]

Interesting article on this subject here: http://www.theaustralian.com.au/bus...lict-of-interest/story-e6frg8zx-1226038738532

A no for now is a must on this basis imo

I can assure you that the Australian only has half the story. The second half is more revealing. ;

 

[Logique]

He he. This is going to get interesting

Oh well, my $5k for the SPP has been sent through the copper wires, so it's sit back and watch the sparks fly I guess.

And I'll return a NO vote, since you guys insist it's for the best.

 

[GumbyLearner]

Interesting article on this subject here: http://www.theaustralian.com.au/bus...lict-of-interest/story-e6frg8zx-1226038738532

A no for now is a must on this basis imo

Thanks for the link Abyss.

It goes on to say that the only way this proposal could be challenged and a value determined is if an open sale process was conducted. However, such a sale process has not been proposed by Lynas. So what is this transaction really about, if one doesn't know if there is anything in the ground and no one seems to know anything?

So what is the real value of the ground being sold to Forge?

Why would the Lynas board say it's non-core if they haven't forwarded any info to shareholders and a JORC has not been determined as yet?

Is it simply non-core because of the nature of the asset niobium, phosphates etc.. or does it contain material of a different or unrelated nature to that of Mount Weld?

Would it's development cost a bucketload?

Maybe the board of Lynas don't view it as a core asset, whereas Mr Curtis (as a common director of both companies) obviously wants Forge to be the first and only cab off the rank to pick it up for $20M. I wonder why there is such interest in a non-core holding. :crap: I always thought bona fide meant at arm's length.

No wonder a lot of Lynas holders feel like they're being treated like mushrooms. Fed on poop and kept in the dark.

It will be interesting to see how this pans out.

Looks like there could be a bit of Cat's paw going on here.

This isn't financial advice
DYOR
GL

 

[Logique]

OK the ASA now has my proxy.

Annexure A, Independent Expert's Report, page 7, footnote 5:

"Dr Zygmunt Switkowski is also an independent director, but was not a member of the independent Board committee"

 

[nioka]

If you want to know more about the Crown deposit and its value then read the 2005 annual report, signed off and delivered by Curtis (available on the Lynas web site)where it states that the deposit has a value of over $50billion. repeated again in 2007 and called "our next project". If you want to check out the "independent" advisor on the deal just google "Riverstone Advisory" and you will also come up with "Sino Resources". Then check the person relationships between Lynas, Forge and Riverstone/Sino. Interesting reading.

Watch the "Australian" finance page next week for another lot of revealing information. All this information has been given to tht Australian Shareholders Assn to use on our behalf at the meeting next month.

The ASA works on your behalh with linited funds. Membership is not expensive and I recommend membership. They can be contacted on 1300368448 or just google Australian Shareholders Assn.

 

[cranium]

If I wish to vote no via proxy, can I just list the Chairmen of the meeting but specify my vote as no? Or do I need to nominate the shareholders association.?

 

[nioka]

If I wish to vote no via proxy, can I just list the Chairmen of the meeting but specify my vote as no? Or do I need to nominate the shareholders association.?

You can. However if you give the Shareholders Assn you proxy it will give them more No votes to claim and help them present a bigger no vote. You dont need to be an association member.

 

[cranium]

You can. However if you give the Shareholders Assn you proxy it will give them more No votes to claim and help them present a bigger no vote. You dont need to be an association member.

OK, I will go with them. Do I need to do anything special in advance with them, or just list them on the form?

 

[nioka]

OK, I will go with them. Do I need to do anything special in advance with them, or just list them on the form?

I listed them on the form then posted the form to the Australian Shareholders Assn. I wanted to be SURE they got it. Their address:

Level 7 North Tower
1-5 Railway Street
Chatswood
NSW 2067.

 

[Logique]

I listed them on the form then posted the form to the Australian Shareholders Assn. I wanted to be SURE they got it. Their address:
Level 7 North Tower
1-5 Railway Street
Chatswood
NSW 2067.

I did this also. Reading the proxy form, it says the Chairman intends to vote in the affirmative on all the motions (in the absence of other direction), so I thought safer to assign proxy to the ASA and mail it to them.

 

[cranium]

I did this also. Reading the proxy form, it says the Chairman intends to vote in the affirmative on all the motions (in the absence of other direction), so I thought safer to assign proxy to the ASA and mail it to them.

Thanks guys, thats what I will do also. Fingers crossed.

 

[nioka]

The game heats up. Don't expect great things for the SP this week. Look at it as short term pain for long term gain.

Philip Wen
April 18, 2011

SHAREHOLDERS have threatened legal action against the rare earths miner Lynas over the proposed sale of a polymetallic resource to Forge Resources which has raised conflict of interest concerns.

The Lynas executive chairman, Nicholas Curtis, a director and 15 per cent shareholder of Forge, stands to vest 24 million in Forge performance shares worth $30 million if the deal succeeds.

In a letter to Lynas obtained by BusinessDay, the law firm Turner Freeman, acting for shareholders Surpion Pty Ltd, Aliana Pty Ltd and Daleford Way Pty Ltd, claimed that information made available to Lynas shareholders, including an explanatory memorandum and a notice of an extraordinary general meeting had been misleading.
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It also did not adequately convey the ''extraordinary'' financial benefit Mr Curtis stood to gain when an ordinary shareholder ''scans or reads the document quickly'', the letter stated, raising concern over the valuation of the deal by independent consultants Grant Samuel.

''Our clients are very concerned about the proposal and are of the considered opinion that it is not in the best interests of Lynas shareholders,'' the letter said.

The transaction's explanatory memorandum sent to shareholders discloses on page four that ''it is arguable that Forge is a related party of Lynas because they share a director in Mr Nicholas Curtis'' and that he owns a ''significant number'' of performance shares in Forge.

The Grant Samuel report judged the deal to be ''fair and reasonable'' but noted the proposal ''must be

carefully scrutinised'' because of Mr Curtis's personal gain. It also said the ''only way to reliably determine the market value of the sublease deposits would be through an open sale process'', which did not occur.

A director of Forge, Emmanuel Correia, told BusinessDay all corporate governance requirements had been undertaken ''over and above what the book requires''.

''I've got full confidence in the governance process and ultimately the shareholders will have an opportunity to vote one way or another, both from a Forge and Lynas perspective,'' Mr Correia said.

Mr Correia said the performance shares were issued to Mr Curtis before Forge listed on the stock exchange in September 2009 as an incentive for him to bring a successful resource project to Forge, when the shares were worth much less.

He said there was no discussion of the Crown resource as a viable option until much later.

''Definitely not,'' Mr Correia said. ''It was many months afterwards.''

Mr Curtis's performance shares will vest on the condition that Forge obtains a JORC-approved resource that is able to support a capital raising of $15 million at no less than 35? a share. Forge shares last traded at $1.15.

The sale of the Crown polymetallic and heavy rare earths resource is worth $20.7 million - less than 1 per cent of the market capitalisation of Lynas, which has seen its share price rise in line with surging demand for rare earth minerals used in mobile phones and laptops.

But concern over the deal has mounted since it was announced last month, with momentum for a vote against it gathering on online share forums.

As one shareholder put it: ''We wish Lynas no harm - we just want a fair deal for the owners of the company. The board, including the chairman [Mr Curtis], needs to be aware and listen to the shareholders.''

Mr Curtis could not be reached for comment yesterday.

Read more: http://www.smh.com.au/business/shar...-lynas-sale-20110417-1djr3.html#ixzz1JobaNGaA

 

[6figures]

yep SP took a good hit today.. what do you think of the effects for long term nioka?

would of been a good chance to take profit and get back in early next week?

 

[Logique]

Under the ASF rules, probably can't supply that answer 6figures.

I think it's important to maintain a sense of proportion here. See under, the context of the overall balance sheet.

On page 13, S4, 'Impact on Lynas':
- adjustment +$20.7M would take Total Cash to $292.2M, or if you like Total Current Assets to $299.4M.
- Or further down, net adjustment of +$16.6M would take Total Assets to $604.8M

So in cash terms, not vastly significant. It's more about the differing opinions on the (potential) opportunity cost (a fair way) down the line.

Q: Would the Lynas board really decide to respond to an expensive legal action for the sake of $20.7M cash and some trailing royalties? That is, making the assumption that Forge would actually develop Crown within a reasonable time frame.

 

[nioka]

yep SP took a good hit today.. what do you think of the effects for long term nioka?

would of been a good chance to take profit and get back in early next week?

At no stage am I prepared to be "out of Lynas". This business could blow up any day. If the deal is withdrawn or stopped proceedingthen i believe we would get an instant increase. I'm certainly not selling and hoping to get back in at a much cheaper price even if that could be the case. I'll just hold long term at this stage.